About the author of this guidance:

Mark, the chief of registrar of company of SMEsChina platform, offers foreign business entities to establish subsidiaries in mainland China and guide his global customers to collect and prepare the required documents from the Chinese Embassies in oversea countries, meanwhile, Mark is a strategy consultant to advise customers about the market access and industrial guidance in terms of the foreign investment enterprise laws and relevant implemented regulations and business rules. OK, let’s go ahead to discuss today’s topic “how foreign company to set up a Chinese subsidiary company?”.

how to set up a subsidiary companyJust as its name implies, a Chinese subsidiary company (sub-company) is owned by foreign parent enterprise(s), the foreign parent company has already obtained the certificate of incorporation as well as the license of business registration, known as: foreign existed companies. Foreign parent company as the shareholder, can get profits to its oversea account after paid tax.

WFOE (wholly foreign owned enterprises) is the most popular corporate type for foreign holding company, the definition of a subsidiary WOFE or WFOE, means the wholly shares of the Chinese LLC owned by foreign parent company. If the new company’s shares owned by foreign shareholder(s) and local shareholder(s), you have to set up a JV (joint venture) in mainland China.

The key factor of a Chinese subsidiary, is the corporate shares have to been owned by foreign parent company (100% shares, or a part of shares).

First, you have to understand, nonresident individual shareholder(s) (known as foreign personal shareholder) can set up a limited company in the mainland China to hold 100% shares, or find a local citizen as the Chinese partner to establish a joint venture by holding a part of shares. This corporate type in China, is called as foreign individual invested enterprises.

However, a standard corporate structure of subsidiary, have to been contained at least 1 foreign corporate shareholder, and the subsidiary’s brand name is similar to foreign parent company’s brand, or trademark.

What is a branch?

In China, if you want to set up a branch in other places or cities, and plan to use the same brand name, you can use a local company as the parent company, here, you have to understand, the parent company is an existed Chinese business and has approved business license and certificate of business registration, this situation, you can set up a branch office under the same group (parent company).


What is foreign subsidiary?

Foreign subsidiary is owned by a foreign company, its different with branch office (branch office’s parent company is a local company has registered in China in advance).

If you plan to joint a local partner to establish the company, you have to decide the shares, the board of directors to set up a structure of joint venture, because your foreign company owns a part of shares, so the joint venture also known as a subsidiary company registered in mainland China. Here, SMEsChina suggests you reading our previous posted guidance <how to set up a joint venture> to learn more details.

How to set up a Chinese subsidiary business

Steps:Topics of Study:Links of Reference:
Step 1Decide what types of software company, depends on your key structure of corporation (shareholder’s structure).Selecting a company type
Step 2How to choose an available company name with bilingual for your private limited company.Naming rules and requirements
Step 3List detail business activities from 10 industrial categories.Selecting business scope
Step 4Set up the registered capital for your limited company.Company registered capital
Step 5Set up core people of your local corporation, and key positions.Decide corporate structure
Step 6Required documents you have to prepare in your country.Documents required to register a company
Step 7Prepare notarization and authentication documents issued by China embassy.Notarization and authentication documents
Step 8Download application forms and legal files and after filling and signing, courier to SMEsChina offices.Company formation documents download

How establishing a subsidiary owned by foreign parent company

Description of Timeline:Processing Time:
Submit the application of company name search and registration.3 workdays
Draft out the documents of incorporation and legal forms, files of business registration.5 workdays
Apply for the 5-in-1 business license and the certificate of foreign owned company.5 workdays
Apply for the company stamps, corporate seals.2 workdays
Corporate account opening and activate the internet banking.5 workdays
Import and export permits (The Customs Registration Certificate).5 workdays

What requirements of establishing a local subsidiary

Key Structure of the Company:Required Documents you have to prepare in your home country:Remarks:
Corporate ShareholderNotarization and authentication documents for the certificate of registration of foreign parent company issued by the Chinese embassy. Learn more: Embassy Notarization Authentication Documents2 sets, bilingual
Individual ShareholderDigital photo, notarization and authentication documents for the passport issued by the Chinese embassy. 16 years old at least. Learn more: Embassy Notarization Authentication Documents2 sets, bilingual
Legal Representative – Chinese PeopleOriginal ID card, 16 years old at least. Digital photo.none
Legal Representative – NonresidentDigital photo. Notarization and authentication documents for the passport issued by the Chinese embassy. 16 years old at least. Learn more: Embassy Notarization Authentication Documents2 sets, bilingual
Supervisor – Chinese PeopleOriginal ID card, photo, 16 years old at least. Digital photo.none
Supervisor – NonresidentPassport copy, photo, 16 years old at least. Digital photo.none
Financial ManagerLocal ID copy, photo, 16 years old at least. Digital photo.none

What documentations required of setting up a Chinese sub-company

Following legal files and register forms you may link to another guidance <company registration documents download> posted by SMEsChina.

Documentation Download List (PDF):Signatory:Remarks:
Letter of Commitment of Establishment of Foreign Investment EnterpriseShareholder(s)Bilingual, print double, black pen
The Letter of Attorney for Appointed or Authorized AgentShareholder(s)Bilingual, print 4 copies, black pen
Foreign Company Registration (Record) ApplicationLegal RepresentativeBilingual, print double, black pen
Information of Legal RepresentativeLegal RepresentativeBilingual, print double, black pen
Information of Executive DirectorDirectorBilingual, print double, black pen
Information of SupervisorSupervisorBilingual, print double, black pen
Situations of Investors ( Shareholder Roster )Needn’tBilingual, print double
The Letter of Attorney of Services of Legal Documents of Foreign Investment EnterpriseLegal Representative and Shareholder(s)Bilingual, print double, black pen
Commitment of the Registry AuthorityLegal RepresentativeBilingual, print double, black pen
Commitment of New EstablishmentShareholder(s)Bilingual, print double, black pen
Virtual Registered Address AgreementLegal RepresentativeBilingual, print double, black pen
Letter of Attorney of Application of Company SealsLegal RepresentativeBilingual, print double, black pen
Letter of Attorney of Corporate Digital CertificateLegal RepresentativeBilingual, print double, black pen
Appointment DocumentShareholder(s)Bilingual, print double, black pen
Sample of the Articles of AssociationShareholder(s)Bilingual, print double, black pen
Application of Foreign Trade Operator CertificatesLegal RepresentativeBilingual, print double, black pen, import and export businesses need it
General Taxpayer Application (VAT Qualification)Legal RepresentativeBilingual, print double, black pen

Setting up costs of a subsidiary business

Service Industry

$4,950first year
  • Government Costs
  • Certificate of Registration
  • Business License
  • Seals/Stamps
  • Virtual Business Registration Address ( 12 months )
  • Annual Tax Compliance ( 12 months )

Trade Industry

$6,450first year
  • Government Costs
  • Certificate of Registration
  • Business License
  • Seals/Stamps
  • Virtual Business Registration Address ( 12 months )
  • Annual Tax Compliance ( 12 months )

What taxation rules you have to learn for an LLC

Taxation Table of General Taxpayer

Basic Taxes:Service Activities:Trade Activities:Engineering and Installation:
VAT – Value Added Tax6%13%9%
Corporate Income Tax – Profit Tax

( less than 1 million RMB each year )

5% ( preferential tax rate )5% ( preferential tax rate )5% ( preferential tax rate )
Corporate Income Tax – Profit Tax

( 1 – 3 million RMB each year )

10% ( preferential tax rate )10% ( preferential tax rate )10% ( preferential tax rate )
Corporate Income Tax – Profit Tax

( more than 3 million RMB each year )

25%25%25%

Taxation Table of Small Scale Taxpayer

Basic Taxes of Small Scale Taxpayer:Service Activities:Trade Activities:Engineering and Installation:
VAT – Value Added Tax3%

Tax-free application with a monthly turnover of less than 100,000 RMB

3%

Tax-free application with a monthly turnover of less than 100,000 RMB

3%

Tax-free application with a monthly turnover of less than 100,000 RMB

Corporate Income Tax – Profit Tax

( less than 1 million RMB each year )

5% ( preferential tax rate )5% ( preferential tax rate )5% ( preferential tax rate )
Corporate Income Tax – Profit Tax

( 1 – 3 million RMB each year )

10% ( preferential tax rate )10% ( preferential tax rate )10% ( preferential tax rate )
Corporate Income Tax – Profit Tax

( more than 3 million RMB each year )

25%25%25%

Suggested reading: <guidance of foreign company establishment>, <how establishing a Chinese subsidiary>.

That’s it, our guidance of setting up a subsidiary company in China edited by our legal team and the chief registrar of company, Mr Mark. If you have everything to establish a subsidiary, you may contact our online lawyers.

Foreign Company Set up Subsidiary Services | SMEsChina.com

SMEsChina provides legal foreign company services and helps foreign parent enterprise establishing a subsidiary simply and quickly by our company registration services.

Service Type: Chinese subsidiaries formation services

Price: 4,950-6,450

Currency: USD

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SMEsChina teams focus on the growth of enterprise and providing a variety of business solutions in the area of strategy consultancy, WFOE setting up services, business registration, company formation, incorporation of domestic invested enterprise, finance and audit services, HR and payroll, corporate bank account, resident permit, immigration and visa, trademarks and legal compliance.

China is attracting more and more foreign companies, SMEs,entrepreneurs, startups, brands to invest and establish their business entities through reforming various laws and regulations actively. More than 47 million companies and small medium enterprises have registered their business entities in mainland China and over 3.5 million new enterprises are incorporated during each financial year with comfortable process of registering companies. Here SMEsChina is sharing our knowledge and business insights to global enterprises and companies for better learning the regulations and rules of China corporations running and corporate maintaining. All reference and guidance collected by SMEsChina Teams in accordance with the latest implemented laws of the People’s Republic of China on Wholly Foreign-Owned Enterprises ( WFOE ), Joint Venture ( JV ) and Limited Liability Company ( LLC ), Limited Liability Partnership ( LLP ), and other relevant and officially promulgated regulations and rules on the corporation formation and registration of industrial and commercial enterprises and related IP laws, immigration and resident policies ( VISA ), tax laws.

SMEsChina teams happy to work around you and look after your daily China operations confidently and smoothly. Check if setting up a private company is right for you, if you have everything to set up a business in Mainland China, you can get in touch with our teams to get more useful information and online guidance.

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